Interview with Richard Bibb, CIO of AIMhedge Establishment
Eurekahedge
AIMhedge is a managed futures/CTA fund based in Liechtenstein. AIMhedge started out as the semi-
automised trading system of Holger Albers in the early 2000s that was fully systematised and started live
trading in 2005. AIMhedge has gone on to win Best German Hedge Fund in 2008 and nominated in the top
five for ‘The Best Hedge Fund over 3 Years’ by the Hedge Fund Review Magazine.
The growth of the firm has now attracted former employees of Man Group, including Richard Bibb to the
team as CIO. Prior to joining AIMhedge, Bibb had spent 12 years as one of the chief system developers at
AHL where during his time, the firm’s AuM rose from US$300 million to over US$20 billion.
AIMhedge Global Diversified Fund is a systematic hedge fund focused on delivering absolute returns by
investing in financial and commodities futures. The trading algorithm is based on a trend-following strategy
with strict risk management rules, implemented on an automated basis. A broad diversification results from
trading more than 60 futures markets worldwide. The fund has two currency share classes: US$ and €, with
minimum investments of US$100,000 and €100,000, respectively. In addition, AIMhedge also offers
managed accounts and structured products.
1. In 2008, the AIMHedge global hedge fund posted gains of 41.4% while all markets across
the globe were going through drastic downturns. How do you explain this commendable
outperformance?
2008 was in many ways a perfect storm for the finance industry and from the perspective of
AIMhedge, it clearly demonstrated the fundamental advantages of systematic managed futures
trading. Trading managed futures allowed us to take advantage of a large, diverse set of rising and
falling markets. Additionally, because futures are exchange traded, our counter-party risk was kept
to a minimum without introducing liquidity issues. During the year, almost all sectors contributed to
our performance, with stock indices and industrials putting in very strong returns. For us, one of the
key advantages of being 100% systematic is that emotion is taken out of the trading environment.
Trading in chaotic times requires good, rational decisions to be made and systematic trading is
based on solid research and pure data.
2. In 2009, your fund’s returns have been in red while the underlying markets, as well as
the global hedge funds, have been largely positive. What are some of the possible
reasons why the fund underperformed this year?
The one thing that 2009 will be remembered for is the fear and uncertainty that permeated the
markets. Nobody knew what was going to happen and many expected the worst. Rating agencies,
central banks and politicians alike lacked a clear understanding of the way forward and so the
industry went to the ground by putting huge amounts of money into sovereign debt. This
withdrawal of liquidity from the futures markets and the increased levels of nervousness caused
numerous sharp transitions in the markets and prevented almost all trend followers from making
profit. Fortunately, the latter part of 2009 has seen a turnaround in performance and our funds are
now in a process of reverting to normal levels of returns. At no point during 2009 have we been
operating outside of the statistical norms of our trading model. AIMhedge has shown a remarkable
amount of resilience during 2009. We believe that this is due to our trading model’s dynamic risk
management and our ability to handle risk in real, monetary-based terms.
We feel that it is important to remember that managed futures investments are not short-term
investments. We would normally recommend that clients leave money in a fund for at least three
years and, if you average our performance over this three-year period, you will see that the
average return is currently running at around 18%. This is our expected long-term return.
www.eurekahedge.com
Copyright © Eurekahedge Pte Ltd 2010. All rights reserved.
In our opinion, the worst is over and the global economy is heading for a slow and possibly painful
recovery. Economists are back into charted waters and as such, predictability will return to the
markets. We believe that AIMhedge can benefit from this environment as the recovery will lead to
clear trends developing. Many of the very large investors are currently sitting on colossal fixed
income positions – these investors have an obligation to pursue returns for their clients and as such,
they will have to re-enter the markets in 2010. This re-entry will cause trends to form, something
we are well-positioned to take advantage of.
3. As a global diversified fund, could you tell us about the regional diversification of your
fund’s portfolio?
AIMhedge is fully diversified, trading nearly 70 futures markets worldwide. We will trade any futures
market that has sufficient levels of liquidity for us to do so.
4. What are the different asset classes that you allocate to? Do you have any fixed asset
allocation ratio or any floor/ceiling in place for your allocations? If so, on what basis do
you decide on these?
AIMhedge only trades futures and LME forwards markets. These markets have sufficient liquidity for
us to grow significantly without endangering our performance. Controlling risk is very important to
us and the assets we trade are all exchange traded, minimising counter-party risk.
5. Tell us about the qualitative and quantitative research that forms part of your investment
process. To what extent does your electronic model influence investment decisions? How
do you go about choosing between alternative models for different asset classes?
AIMhedge is a 100% systematic managed futures trader. We believe in a well-researched highly
statistical approach to trading. We also believe that simple models are robust models. Complexity
tends to indicate a lack of clarity in the thought process and could indicate that the model has been
overfitted to the data. Our main fund uses a single model to trade all markets and almost all of the
parameters are at the portfolio level.
6. Could you take us through the process of how (and on what basis) the software works
out models and trends for your investments?
The main trading system at AIMhedge is fundamentally a medium-term trend-following system.
However, we do not operate an “always in” model. Our system examines markets for trends using a
combination of trend-following, breakout and what I term a “proprietary third approach” (kept
under wraps to protect our IP). Once we have detected a trend, our risk management system
calculates a position based on our desired exposure to the market in question. Risk is central to our
trading approach and ensuring that no single position exceeds predefined limits is key to doing so.
We also examine risks associated with traditional sectors, risks due to short-term market
correlations and total portfolio risk. Once we are happy that the desired position is within our risk
limits, we make a trade. From then on, the position is managed by our risk management system. All
positions have explicit monetary risk levels associated with them; thus, we are not exposing the
client to unforeseen VaR-type losses.
www.eurekahedge.com
Copyright © Eurekahedge Pte Ltd 2010. All rights reserved.
7. On average, how many positions do you hold at any given time? What is the typical
holding period for a position?
AIMhedge generally holds a portfolio of between 30 and 40 markets, although this could increase to
just below 70 markets if conditions are right and trends are detected in every market. Our typical
holding period is two weeks for a losing trade and two months for a winning trade.
8. Tell us about the risk management tools and practices that you have in place. Have your
risk guidelines changed after the financial crisis?
Our trading system implements an active risk management system that, unlike the industry norm of
generating VaR-type figures, generates exact, monetary-based risk figures. These figures are
available for all of our traded markets, sectors, correlated groups and for the portfolio as a whole.
The risk levels are controlled explicitly and are recalculated every time the trading system runs. Our
belief is that VaR figures have very little significance in fund management as they do not, in
themselves, do anything to control risk. If you are serious about risk, you need to have a system in
place that actively controls risk and keeps it within acceptable levels.
Our performance in 2008 shows that our system controlled risk very well during the crisis and does
not require redesigning.
9. Given that the fund takes on a trend-following strategy, what is your outlook on the
fund’s performance in the next 6 to 12 months? Do you expect market volatility to head
higher in future? Why do you say so?
We do not expect volatility to head higher in the next 6 to 12 months. We believe that as the world
recovers from the downturn of 2008, the fear that has driven the markets over the last year and a
half will recede to more normal levels. Along with the reduction in levels of volatility, we feel that
volumes will begin to pick up as institutions move away from holding large cash positions. Both of
these attributes bode well for our trading approach in 2010. Evidence of this is already coming
through in the performance figures we have released during the latter half of last year.
10. Often, it is difficult to describe complex quant models to investors. Have you found this a
hindrance to raising capital? Which types of investors have shown interest in the fund
since its launch?
We do not believe in complex trading algorithms. Good trading ideas are generally fairly easy to
explain as they are based on solid, sensible ideas. Our trading approaches lend themselves to being
explained fairly easily, although a few aspects of the model are not discussed; we do not want to
lose our trading advantage by giving away the finer details of how we trade.
In general, we have found that the risk-handling aspects of our model are very attractive to
prospective investors. This may explain why, in what has been a fairly poor year for many funds, we
have increased our FuM by over 20%.
Most of our investors are institutional fund of funds and it is this type of investor that has
contributed to our growth. With the release of our UCITS III fund in the New Year, we should see
inflows from pension funds and high net worth individuals from within Europe. Outside of Europe
UCITS III has less relevance, but we expect to see significant inflows as the worldwide economy
grows.
www.eurekahedge.com
Copyright © Eurekahedge Pte Ltd 2010. All rights reserved.
11. What classes of investors (retail, institutional, HNW individuals, etc) is your investor base
currently made up of? Could you give us a rough breakdown of the same? Also, how is
this spread geographically?
Our client base is predominantly institutional (around 80%) including fund of hedge funds, asset
managers and private banks. The remaining comes from high net worth individuals. We do not
actively target the retail market even though with a UCITS III fund, we could.
Contact Details
Richard Bibb
Chief Investment Officer & Partner
AIMhedge Establishment
Industriering 10
FL 9491 Ruggell
Liechtenstein
Phone: +423 375 77 77
[email protected]
www.aimhedge.com
www.eurekahedge.com
Copyright © Eurekahedge Pte Ltd 2010. All rights reserved.
